Damaging files highlight risks of bankruptcy for church

The court-ordered release of 2,200 pages of documents this week provides new details on how Boston's top Roman Catholic leaders covered up sexual abuse - an embarrassing development for the embattled archdiocese.

But it also highlights the risks for dioceses of filing for bankruptcy - a move Boston, and perhaps others, are considering amid the rising costs of scandals and shrinking contributions from congregations.

Bankruptcy would provide legal protections. But it would also allow judges to order the opening of church files - a painful step for a denomination that prizes secrecy.

"If they go into bankruptcy court, all the books are going to be opened, and everything's going to be very clear," says Thomas Reese, editor of America, a Catholic magazine.

Boston's archdiocese is reportedly considering bankruptcy as it deals with nearly 450 new sexual-abuse suits. And a new letter from California bishops to the state's parishioners pointedly asserts that the church is not a "large corporation with 'deep pockets,' " leading some to conclude that they might consider bankruptcy filings.

The files released in Boston this week - at the order of a state-court judge - concern eight priests and reveal a church hierarchy willing to excuse or gloss over serious evidence of misconduct.

In one case, a priest denied allegations of sexual abuse and drug dealing but was transferred in 1983 to a new Massachusetts parish - even after a local bishop raised questions with top church officials. The priest, the Rev. Richard Buntel, later admitted to having sex with at least one teenager and was put on leave in 1994.

In another case, a priest who had just undergone counseling for pedophilia was placed in a Boston parish in 1982. A note on his file - apparently written by an archdiocese official - read, "Problem: little children." Yet no restrictions were put on Father Robert Burns's ministry. In 1991, he was accused of repeatedly raping and molesting a boy. Boston Cardinal Bernard Law removed him from the ministry, but sent a gentle note of gratitude for his service.

Records for nearly 60 other priests will be released in coming weeks as part of a continuing legal battle. The records are being made public by lawyers for some of the nearly 450 plaintiffs still suing the Boston church on sexual-abuse grounds. The releases have the effect of pressuring church officials to make big financial settlements in the outstanding suits.

BUT in what some observers see as a counterstrategy, the threat of bankruptcy was leaked to news organizations this week - perhaps to try to get victims' lawyers to settle for smaller amounts.

The approach worked before: In 1997, after the Dallas archdiocese was hit with a $119 million jury award in a sexual-abuse case, it threatened bankruptcy. Victims settled for $31 million.

"The message to attorneys is, 'Be reasonable in your settlement demands or we will declare bankruptcy," says Fred Naffziger, a business-law professor at Indiana University. If the church did declare bankruptcy, the plaintiffs would be last in line to collect cash. Bankruptcy courts are also known to lower lawyers' fees.

One benefit for the church: A court-imposed deadline for all suits. But there are downsides. The cardinal, who is nearly all-powerful under canon law, would have to submit to a judge. Almost any church file relevant to a creditor's claim - not just financial records - would be subject to opening. Professor Naffziger envisions legions of "forensic accountants" digging through church records to untangle connections between bishops, parishes, and other church-related groups.

That's why some experts think a bankruptcy filing is unlikely - and that other dioceses or the Vatican would step in to help. "It would be a final act of desperation," says Naffziger.

Clearly, though, dioceses nationwide have run into a financial storm - with settlements and legal fees running high, a drop-off in contributions, the tumble in investment-portfolio values, and an increased demand for social services such as food pantries and homeless shelters.

In one recent poll, 19 percent of ardent Catholics said they'd stopped giving money to their dioceses.

Yet churches are hardly ready to close their doors. One analysis pegs the Boston church's land holdings alone at $1.3 billion.